Start-Up Quarterly Statistics: Early Funding Declined, But Deal Dollars Flowed
Executive Summary
A review of biopharma startup dealmaking and financing activity from January through March 2017, based on data from Strategic Transactions, showed a 19% decline in startup financing compared with the fourth quarter of 2016, but big pharmas provided capital in the form of alliance fees.
Biopharmaceutical start-ups brought in 19% less funding in the first quarter of 2017 as compared with the previous quarter, but venture capital investors placed big bets on a few new companies, including a $150m Series A round for Vir Biotechnology Inc. helmed by Biogen's former CEO.
But while venture capital financings declined from one quarter to another, big pharmas and others continued to tap into the innovation occurring at start-up firms. AbbVie Inc., Takeda Pharmaceutical Co. Ltd. and Novartis AG each penned a pair of alliances, giving start-ups – companies that are no more than four years old – access to cash beyond early seed and VC rounds.
Novartis out-licensed two programs for aging-related diseases and entered into a separate collaboration to develop two antisense drugs for cardiovascular indications, committing up to $1.7bn to the deal. AbbVie initiated alliances to develop therapies for inflammatory conditions and to conduct large-scale genomic research, while Takeda's deals involved rare disease treatments and immuno-oncology drug development.
Only two start-ups were acquired in the first quarter: Celgene Corp. said it would pay up to $775m for Delinia Inc. barely a year after the small firm launched; in the other deal, one small company gobbled up another small firm.
Financings
Biopharma start-ups raised a total of $1.66bn during the first quarter of 2017, a nearly $39m, or 19%, drop from the final quarter of 2016. Of the 44 start-ups raising money, half of them closed Series A rounds totaling $715m. Two firms were successful in going public. (See Exhibit 1.)
Exhibit 1
Start-Up Biopharma Financings, Q1 2017 ($m)
Total Raised: $1.66bn
Note: Not included in the chart is a seed financing (Atriva Therapeutics GMBH) in which no money was disclosed.
Source: Strategic Transactions
The top Series A fundraiser was Vir Biotechnology, launching with more than $150m from lead backer Arch Venture Partners, which was joined by the Bill & Melinda Gates Foundation, sovereign wealth funds, public mutual funds, and individuals and family offices. [See Deal] Former Biogen CEO George Scangos took the helm at Vir, which will concentrate its efforts on using immune programming to manipulate pathogen-host interactions in order to create cures, therapies and preventive medicine for infectious diseases. (Also see "VC Roundup: Infectious Disease Startup Snags $150m And Former Biogen CEO Scangos" - Scrip, 8 Jan, 2017.)
Fortress Biotech Inc.'s Mustang Bio Inc. also raised a significant amount in Series A funding with $94.5m. [See Deal] The two-year-old cancer immunotherapies developer in-licensed its chimeric antigen receptor engineered Tcell (CART) technology from the City of Hope. [See Deal] Mustang's lead compounds are Phase I MB101 for glioblastoma multiforme and MB102 for acute myeloid leukemia.
The largest Series B fundraiser was PMV Pharmaceuticals Inc., bringing in $74m from investors including co-leads Topspin Biotech Fund and Euclidean Capital, along with existing shareholders InterWest Partners, OrbiMed Advisors, and Osage University Partners. [See Deal] The funding will support ongoing preclinical studies of p53-targeted small-molecule cancer therapies. (See Exhibit 2.) (Also see "Finance Watch: Surrozen Raises $33m In $483m February Flurry; Also, Are Reverse Mergers This Year's IPOs?" - Scrip, 28 Feb, 2017.)
Exhibit 2
Top 10 Private Funding Rounds For Biopharma Start-Ups In Q1 2017
Source: Strategic Transactions
|
Date |
Company |
Amount Raised ($m) |
Round |
|
January |
Vir Biotechnology |
150 |
A |
|
February |
Mustang Bio |
94.5 |
A |
|
February |
PMV Pharmaceuticals |
74 |
B |
|
January |
Neon Therapeutics |
70 |
B |
|
March |
SutroVax |
64 |
B |
|
March |
LAM Therapeutics |
58 |
C |
|
March |
Tango Therapeutics |
55 |
A |
|
March |
Spero Therapeutics |
51.7 |
C |
|
February |
Vividion Therapeutics |
50 |
A |
|
March |
Breath Therapeutics Holding |
46 |
A/Spin-off |
Breath Therapeutics Holding BV spun-off from Pari Pharma GMBH and raised €43.5m ($46m) in Series A financing. [See Deal] As part of the spin-off, Breath gained from Pari a Phase III-ready drug/device combo for bronchiolitis obliterans syndrome. The product consists of an inhaled formulation of cyclosporine A with an eFlow nebulizer that can be remotely monitored. [See Deal] Breath will use the Series A money for Phase III trials in the US and Europe, FDA and EMA regulatory activities, and pre-commercialization. (Also see "Vacant Post-Lung Transplant Market Is Big Opportunity For Breath Therapeutics" - Scrip, 9 Mar, 2017.)
Breath was one of four spin-offs this quarter. Satsuma Pharmaceuticals Inc. (migraine therapeutics) spun out of Japanese CRO Shin Nippon Biomedical Laboratories Ltd. and concurrently brought in $12.3m through a Series A. [See Deal] Evotec AG launched fibrotic disease-focused firm Fibrocor Therapeutics LP, which concurrently raised $Cdn2.8m ($2.1m) from MaRS Innovation. [See Deal] Finally, Biscayne NeuroTherapeutics Inc. spun off from Biscayne Pharmaceuticals Inc. to advance the Phase I epilepsy candidate BIS001. [See Deal] Biscayne Neuro concurrently closed a $3m Series B round co-led by Quark Venture and GF Securities. (Also see "VC Roundup: 2016 US Investment Ends On A Down Note, But Biopharma Has Second-Best Year" - Scrip, 31 Jan, 2017.)
Five biopharma companies went public during the first quarter, including two start-ups (defined as companies started during the past four years). Immuno-oncology company Jounce Therapeutics Inc. netted $108.9m through an upsized initial public offering with the sale of 7.3m common shares (including the overallotment) at $16 each. [See Deal] It originally planned to sell 5.36m shares between $13 and $15. (Also see "IPO Update: Three Biopharma Offerings In January Contrast With Last Year’s Slow Start" - Scrip, 6 Feb, 2017.)
Jounce's lead candidate JTX2011 is a Phase I/II monoclonal antibody for solid tumors and works by binding to and activating the inducible T-cell co-stimulator (ICOS) protein. In mid-2016, Jounce granted Celgene an exclusive option to license ex-US rights to JTX2011 and up to five other candidates. In exchange, Celgene paid $225m in cash up front and made a $36m equity investment in Jounce. [See Deal] If the option is exercised and JTX2011 makes it to the market, the companies will share profits on a 60/40 Jounce/Celgene basis. (Also see "Jounce Gets $261m To Start, Milestone Fees Up To $2.3bn In Celgene Deal" - Scrip, 19 Jul, 2016.)
Also going public was cancer-focused BeyondSpring Inc., which only raised $3.2m. [See Deal] But the firm concurrently netted $50.8m through a private placement of 2.5m shares at the $20 IPO price to investors affiliated with BeyondSpring shareholders. [See Deal]. The four-year-old firm's lead candidate plinabulin was in-licensed from Nereus Pharmaceuticals Inc. Plinabulin is currently in Phase III trials in combination with docetaxel for non-small cell lung cancer, Phase II/III for the prevention of chemo-induced neutropenia, and Phase Ib/II in combination with Bristol-Myers Squibb Co.'s PD-1 inhibitor Opdivo (nivolumab) for NSCLC. (Also see "Finance Watch: Two New VC Funds Raise $500m; One New US IPO; And Galena's 'Strategic Review'" - Scrip, 17 Mar, 2017.)
Alliances
In terms of deal value, Novartis' potential $1.7bn tie-up with Ionis Pharmaceuticals Inc.'s Akcea Therapeutics Inc. division took the top spot. Novartis received an exclusive worldwide option to develop and commercialize the cardiovascular-related antisense candidates AKCEA-APO(a)-LRx (Phase II) and AKCEA-APOCIII-LRx (preclinical). [See Deal] For its option, Novartis paid $175m up front ($75m in cash and $100m in stock) and will make another $50m equity investment in Akcea in the next 18 months. In addition, the big pharma will pay up to $580m in development and regulatory milestones, up to $550m in commercial milestones, plus tiered sales royalties in the mid-teens to low 20% range. Should Novartis exercise the option, it will pay a $150m exercise fee per candidate. (Also see "Novartis Spreads Cardiovascular Bets with Ionis Antisense Option Deal" - Scrip, 6 Jan, 2017.) Akcea was formed in late 2014 to apply Ionis' ligand-conjugated antisense technology to certain cardiometabolic candidates in the Ionis pipeline. (Also see "Novartis Spreads Cardiovascular Bets with Ionis Antisense Option Deal" - Scrip, 6 Jan, 2017.)
Novartis, through Novartis Institutes for BioMedical Research Inc., penned a second Q1 alliance. PureTech Health PLC, through a newly created subsidiary named resTORbio, seeks to advance two Phase IIb-ready Novartis selective mechanistic target of rapamycin complex 1 (mTORC1) inhibitors aimed at multiple aging-related conditions. [See Deal] ResTORbio will have exclusive development and commercialization rights to the therapies, and PureTech will contribute $15m to development. PureTech currently has a 58% ownership stake in resTORbio, but that can be increased to 67% upon PureTech's allocation of an additional $10m to the mTORC1 inhibitor program. As part of the licensing agreement, Novartis will receive equity in resTORbio, future milestones payments, and net sales royalties. (Also see "PureTech Health: Applying Deep Thinking And Business Acumen" - Scrip, 28 Mar, 2017.)
Novartis was one of eight big pharma companies to sign agreements with start-up firms during Q1 and was one of three to sign a pair of deals. (See Exhibit 3.) AbbVie's two alliances were both announced on the same day. With Zebra Biologics Inc. the big pharma is collaborating to identity agonist antibody therapies for inflammatory diseases. [See Deal] Zebra will use its patented discovery platform to generate and screen antibodies against AbbVie-chosen targets. The technology is able to produce candidates for new and/or previously hard-to-drug targets. Both firms will perform candidate identification and preclinical validation activities. AbbVie will take over global clinical development, manufacturing, regulatory approvals and commercialization.
In the second deal, AbbVie teamed up with Genomics Medicine Ireland Ltd. (GMI) and WuXi NextCODE Genomics to perform population genomics research in Ireland in an effort to discover and develop new therapeutics in the fields of cancer, neuroscience and immunology. [See Deal] In the 15-year partnership, GMI seeks to create a database of 45,000 sequenced genomes from Irish volunteers, while WuXi will use its integrated genomics platform to organize and mine the database. AbbVie will then use the genotypic and phenotypic data to research new molecular approaches for drug discovery and development, and to develop companion diagnostics. (Also see "Deal Watch: More Predictions 2017 Will Be A Banner Year For Deal-Making" - Scrip, 24 Jan, 2017.)
Takeda's two deals were penned in the same month. Takeda and Ovid Therapeutics Inc. are forming a joint development team to develop the big pharma’s Phase Ib/IIa-ready TAK935 cholesterol 24 hydroxylase inhibitor for rare pediatric epileptic encephalopathies including Dravet syndrome, Lennox-Gastaut syndrome and Tuberous Sclerosis complex. [See Deal] Takeda took an equity stake in Ovid and could receive undisclosed milestones. All costs and profits will be shared 50/50. Takeda leads commercialization in Japan (with an option for all of Asia), while Ovid is responsible for R&D and commercialization in the US, Europe, Canada and Israel. (Also see "Takeda Targets Severe Epilepsies In Ovid Alliance" - Scrip, 19 Jan, 2017.)
Through its Takeda Oncology division, Takeda will help develop Maverick Therapeutics Inc.'s cancer immunotherapies, which incorporate the start-up's T-cell engagement platform. [See Deal] Takeda is paying Maverick up to $125m in up-front cash, equity and R&D funding, including Takeda’s participation in Maverick’s concurrent $23m Series B round. [See Deal] The collaboration will continue for five years, after which point Takeda can exercise an exclusive option to acquire Maverick for an undisclosed sum. (Also see "Deal Watch: J.P. Morgan Brings Continued Brisk Pace Of Transactions" - Scrip, 12 Jan, 2017.)
Exhibit 3
Alliances Between Start-Ups And Big Pharma Companies, Q1 2017
Source: Strategic Transactions
|
Headline / Date |
|
AbbVie, Zebra pen antibody discovery deal / January |
|
AbbVie, Genomics Medicine, Wuxi NextCODE sign 15-year genomics partnership / January |
|
Ovid joins development and commercialization of Takeda's pediatric epilepsy therapy / January |
|
Maverick Therapeutics gets R&D support from Takeda; Takeda gets M&A option / January |
|
Cerveau licenses PET agent from Merck / January [See Deal] |
|
Novartis options cardiovascular antisense candidates from Ionis's Akcea for up to $1.7bn / January |
|
CiVi Biopharma starts operations with Roche's PCSK9 inhibitor / January [See Deal] |
|
Janssen options Amorsa's depression candidate / January [See Deal] |
|
TerSera pays $250m up front for US/Canadian rights to AZ's Zoladex / February [See Deal] |
|
PureTech creates resTORbio subsidiary to in-license Novartis aging-related programs / March |
Two start-ups also each signed a pair of alliances during the first quarter of 2017. Hope Biosciences licensed exclusive rights to develop and sell AptaBio Therapeutics Inc.’s preclinical aptamer drug conjugate APTA12, which Hope renamed HOPE888. [See Deal] The compound is in development for acute myelogenous leukemia and bladder and pancreatic cancers. Just a week after that deal, Hope received exclusive global rights to develop and sell NeoPharm Co. Ltd.'s MERTK/AXL/pan-C-MET tyrosine kinase inhibitor. [See Deal] Hope named the preclinical candidate HOPE777 and will continue working on it for non-small cell lung, brain and stomach cancers. Hope also plans to develop it as a monotherapy and as an immuno-oncology combination with checkpoint inhibitors. Clinical trials are expected to commence in 2018. HOPE888 and HOPE777 are Hope's only two pipeline projects. (Also see "Deal Watch: Seattle Genetics Adds To Antibody-Drug Conjugate Portfolio" - Scrip, 14 Feb, 2017.)
Upon launching, Telix Pharmaceuticals Ltd. entered two partnerships within two days of each other. From Wilex AG the new firm in-licensed exclusive global rights to develop, manufacture and sell Redectane, an iodine-labelled form of the chimeric monoclonal antibody girentuximab in Phase III as an imaging agent for clear cell renal cell carcinoma. [See Deal] Telix is paying Wilex upfront and milestone payments of up to $3.7m and “significant sales royalties” for diagnostic uses, and is responsible for all costs associated with the compound. Telix will also develop a radio-immunoconjugate program based on girentuximab for potential use with beta- and alpha-emitting radionuclides for cancer treatment. From Therapeia GMBH & Co. KG, Telix obtained the preclinical brain cancer candidate ACD101, which is an L-type amino acid transporter 1 inhibitor that's administered via intravenous injection and actively reaches tumor cells over the blood-brain barrier. [See Deal] ACD101 is in development for use in brain cancer imaging with diagnostic radiolabeling and therapeutic radionuclides, and has potential as both a monotherapy and combination treatment with radiotherapy agents. As part of the agreement, Telix received the option to acquire Therapeia.
Lin BioScience Inc. was involved in a deal trifecta, all with tech transfer entities. In January the one-year-old firm received exclusive worldwide rights from Columbia University to intellectual property and a program (to be known as LBS008) aimed at atrophic dry age-related macular degeneration. [See Deal] (Also see "Tech Transfer Roundup: Aduro Hopes Stanford Algorithm Will Optimize Its IO Candidates" - Scrip, 10 Feb, 2017.) In March, Columbia and Memorial Sloan Kettering Cancer Center granted Lin exclusive global rights to IP surrounding a CDC7 kinase inhibitor, named LBS007 by the company. [See Deal] Lin plans to commence a Phase I trial later this year in patients with acute myeloid and lymphoid leukemias, chronic myeloid leukemia in blast crisis (resistant to oral tyrosine kinase inhibitors) and myelodysplastic syndrome. (Also see "Tech Transfer Roundup: Repeat Business As Boehringer, Vanderbilt Collaborate Further On KRAS" - Scrip, 8 Mar, 2017.) Finally, the University of Sydney granted Lin an exclusive worldwide license to develop and sell a microtubule inhibitor for brain cancer. [See Deal] The candidate, LBS002, has shown that it can cross the blood-brain barrier, overcoming therapeutic limitations associated with traditional treatments for glioblastoma and metastatic brain cancers. (Also see "Tech Transfer Roundup: Ohio State Turns To Industry Exec To Optimize Assets Before A Deal" - Scrip, 7 Apr, 2017.)
Acquisitions
Just two biopharma start-up acquisitions were announced in the first quarter. Celgene shelled out $300m up front for one-year-old private biotech Delinia and could also pay another $475m in potential earn-outs. [See Deal] The start-up is focused on creating autoimmune disease therapies that can regulate the immune system to fight disease without causing immunosuppression. Lead compound DEL106 is a preclinical IL-2 mutein Fc fusion protein. (Also see "Deal Watch: Best Value For Smaller Firms Lies In The Back-End" - Scrip, 1 Feb, 2017.) This deal came just a few weeks after Celgene paid $45m to obtain an exclusive option to acquire Anokion SA, a start-up working on antigen-specific immune tolerance in the autoimmune disease space. [See Deal] Celgene may also hand over $10m in preclinical development milestones. (Also see "Billions On The Line With Celgene’s Partnered Pipeline" - Scrip, 26 Jan, 2017.)
In March, Luc Therapeutics Inc. acquired private orphan CNS disease startup Ataxion Inc. [See Deal] Luc was attracted to Ataxion's ion channel ataxia program, which the firm in-licensed from Saniona AB (formerly Aniona) in mid-2013. [See Deal] At that time the program was in late lead-optimization, but has progressed into preclinical studies. Ataxia is a rare neurodegenerative motor disorder characterized by dysfunction of the cerebellum. Ataxion was seeded by Altas Venture, which also participated in the start-up's 2014 Series A round along with Biogen. [See Deal] As part of the financing, Biogen purchased $1.6m in Ataxion equity and agreed to provide non-dilutive and R&D funding for its hereditary ataxias project, and received an option to acquire Ataxion outright for an upfront payment plus milestones. Now that Luc has purchased the firm, Biogen's option is no longer valid. Following the Luc/Ataxion transaction, Ataxion and Saniona will continue their 2013 collaboration and Saniona will hold a 7.1% stake in the merged company and maintain royalty rights to resulting marketed products from the ataxia program. (Also see "Deal Watch: Troubled Antibiotics Maker Cempra Exploring Strategic Options" - Scrip, 13 Mar, 2017.)
From the editors of Start-Up